New developer emerges for downtown Heer's building

May 16, 2013

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News-Leader Staff

A Heer’s timeline

1995: The Heer’s department store closes after 79 years in business. Davis Properties purchases the building. 2004: The city partners with Jefferson City developer Vaughn Prost to redevelop the building and declares the property blighted, allowing Prost to apply for property tax abatement. 2006: The city threatens to foreclose on Prost, who has failed to secure construction loans and missed numerous deadlines. The city takes possession of the building Dec. 19. 2007: City Council sells the building for $3 million to Chouteau Properties and St. Louis developer Kevin McGowan, who wants to renovate the building into a hotel but later revises his plan to include condos. 2008: Council approves a redesign of Park Central Square that is required as part of the deal with McGowan, but the plan is blocked when the square is declared historic. McGowan lets the city off the hook in return for an indefinite contract extension. 2009: McGowan says he is applying for an $11.8 million loan from the Department of Housing and Urban Development. 2010: Council approves a $3 million loan package as well as other incentives, but McGowan, citing the poor economy, drops his HUD loan application and shelves the project. 2011: The city boards up the building, placing a lien against the property that must be paid before it can be redeveloped. As of March, the amount owed was about $100,000. 2012: E and J HIDC, LLC buys the mortgage on the Heer’s building from Heartland Bank for an undisclosed amount. 2013: The Missouri Department of Natural Resources files notice that the building is contaminated with lead-based paint. E and J HIDC sells the building to itself April 22.

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The Heer’s building may be getting another shot at life — a “luxury” life, at that.

Vacant since 1995, the building has been in limbo since St. Louis developer Kevin McGowan mothballed his $29 million renovation plan in 2010.

As it has for other potentially complex redevelopment projects, the city is asking the developers to fund preparation of the plan. A bill on City Council’s agenda on Monday requires the developers to deposit up to $20,000 to pay for outside legal counsel.

An explanation sheet attached to the bill says the developer, Heer’s Luxury Living, LLC, wants to put together a term sheet and redevelopment agreement “identifying the level of incentives which will be requested and the obligation of the developer to rehabilitate the Heer’s building.”

Once finished, City Council still would have to approve any local incentives offered as part of the financing plan, which could include state and federal tax credits or loans as well as private equity.

A legal agreement included with the bill specifically mentions property tax abatement — a common benefit granted to downtown redevelopment projects — as one incentive being explored.

Several special tax districts that were created in the course of earlier, failed renovation efforts also could be reactivated or amended.

A term sheet City Council approved shortly before McGowan’s project collapsed also included a $2 million, low-interest loan from the city’s Small Business Development Loan program, plus another $1 million loan the city agreed to borrow from the state on McGowan’s behalf.

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The council bill sheds little light on the developer’s plans for the building. Planning Director Ralph Rognstad said Economic Development Director Mary Lilly Smith has been the main city contact on the project. Smith was out of the office on Thursday and unavailable for comment.

Kansas City attorney Chris Barhorst is listed as the organizer of the company.

Barhorst also organized E and J HIDC, LLC, the company that bought the loan on the Heer’s building and then sold the property to itself in April, a legal move that allowed it to establish a clear title.

Filings for both companies list Scot Sperry as registered agent.

Sperry is vice president of development for the Dalmark Group, a commercial development and property management company based in Lee’s Summit.

The Dalmark website says the company has a history of “successfully redeveloping troubled properties, as well as developing new conventional and Low Income Housing Tax Credit communities.”

Many of the projects highlighted on the website are townhouses or apartments, but one — the renovation of the 1924 Hyde Park Hotel in Midtown Kansas City — appears to be of a similar size and scope to the Heer’s.